EIFY: terms of use

Following on from this week’s earlier post about the copyright issues in the EIFY case, McDougall J also held the “clickwrap” agreement was enforceable, but the breach did not result in any compensable loss.

You will remember that EIFY and 3D Safety provide competing web-based induction services for the construction industry. The principals of 3D Safety had accessed EIFY’s site in the course of developing its websites for Mirvac and Thiess.

Before a browser could access the web-based induction services provided by EIFY, he or she had to check a box acknowledging that he or she had read and agreed to the terms and conditions of use. McDougall J found this sufficient to form an agreement.

The registration details a user was required to input included an ABN and at least one of the 3DSafety principals had entered in his company name as well.

The terms and conditions, however, followed the modern form of drafting, referring to “you” and “your”. At [324] – [325], McDougall J found that this gave rise to a binding contract only with the particular user and not his or her company:

324 The strong impression conveyed by the terms of use overall is that they are directed to regulating the basis on which each person who has access to the website exercises that access. The terms of use appear to distinguish between those who access the website (“you”) and those with whom EIFY “enters into agreements” (“Clients”).

325 In the absence of any express acknowledgment, either in the registration webpages or in the terms of use themselves, that an individual who registers and thereafter accesses the site accepts the terms of use not only in his or her own right but also on behalf of his or her employer, I think that Mr Andronos’ submission on this point is correct. By clicking to acknowledge their acceptance of the terms of use, Messrs Conacher and Morrow indicated that they personally accepted those terms. That must mean that they agreed to accept those terms of use as regulating their personal access to the website. It does not follow, and I do not find, that by doing so they agreed to bind Services or Systems to those terms of use.

326 In short, Messrs Conacher and Morrow were bound by the terms of use. [3D Safety was] not.

The terms of use included clause 5:

  1. Access and Interference
    You agree that you will not use any robot, spider, other automatic device, or manual process to monitor or copy our web pages or the content contained herein without our prior written permission. You agree that you will not use any device, software or routine to interfere or attempt to interfere with the proper working of our Site. You agree that you will not take any action that imposes an unreasonable or disproportionately large load on our infrastructure. Much of the information on our Site is updated on a real time basis and is proprietary or is licensed to e-Induct® by our Clients or third parties. You agree that you will not copy, reproduce, alter, modify, create derivative works, or publicly display any content from our Site without the prior written permission of e-Induct or of the party authorised to grant such permission.

McDougall J was rather critical of the drafting of this clause. Nonetheless, he was able to find that Conacher and Morrow (the principals of 3D Safety)[1] had accessed EIFY’s site and breached the terms. However, this did not help EIFY.

This was because McDougall J found that the only breach of the terms had been accessing confidential information. The confidential information was confidential to EIFY’s clients, not to EIFY. As a result, his Honour considered EIFY would not be able to establish any loss to be compensated through damages.

EIFY Systems Pty Ltd v 3D Safety Services Pty Ltd [2017] NSWSC 1310 (McDougall J)

  • By the time of the trial, Morrow had in fact ceased being a director and only held some shares.  ?

The penalty for contempt

Previously, I had noted that the remedy for breaching an injunction is proceedings for contempt of court.

Tracey J, having found various respondents in contempt arising from breaches of injunctions made in 2004 not to infringe Ugg Australia’s copyright and trade marks in connection with the manufacture and sale of ugg boots, has now handed down the punishments:

  • One of the individual respondents, a Mr Vladimir Vaysman, was sentenced in the No. 8 proceeding to 3 years’ imprisonment for the most serious contempt
  • A second principal contemnor, Mr Josef Vaysman (the father of Vladimir) has been sentenced to 18 months imprisonment, with a minimum of 6 months to be served and the balance suspended for 2 years, in the No. 9 decision,
  • a third principal, Victoria Vaysman (the daughter of Josef, and sister of Vladimir) received a sentence of 12 months, with a minimum of 2 months to be served and the balance suspended for 2 years in the No. 8 decision;
  • all also received other, shorter terms of imprisonment for lesser breaches to be served concurrently.

It would appear that copyright owners over in the UK have secured their first imprisonment for ‘camming‘, although that seems to be for a criminal offence rather than contempt.

Deckers Outdoor Corporation Inc. v Farley (No 9) [2010] FCA 1007

Deckers Outdoor Corporation Inc. v Farley (No 8) [2010] FCA 657

Damages for breach of franchise agreement

Howard’s Storage World (HSW) granted Haviv a franchise to operate an Howard’s Storage World retail outlet at Burwood in Sydney. The terms of the franchise included a grant of an exclusive territory for a radius of 5km.

Subsequently, HSW granted someone else an franchise to operate an Howard’s Storage World franchise at a new shopping centre at Rhodes, approximately 4,840m from Haviv’s Burwood store.

The breach of the contractual exclusivity promise was found, but claims for breach of TPA by misleading or deceptive conduct were rejected.

Jagot J explores the basis on which the damages payable to Haviv should be calculated in Haviv Holdings Pty Limited v Howards Storage World Pty Ltd [2009] FCA 242.

Her Honour considered the nature of the grant of exclusivity – it did not extend as Haviv contended, to a right to be offered the franchise for Rhodes. Nor did it preclude the opening of another store with a territory radius of 5km which overlapped with the territory within 5km of the Burwood store.

On the calculation of damages, her Honour considered the following issues:

  1. Was Haviv entitled to claim damages on the scenario that, if the third party had not been granted the Rhodes franchise, Haviv would have been – No
  2. Did Haviv prove that the breach of the exclusivity promise caused it loss – Yes
  3. How to assess that damage on the basis of loss of net profits
  4. The extent to which damages should be calculated for the period after Haviv closed the Burwood store in 2007 – damages would be payable until the expiry of the last option for renewal period – 2022
  5. The date the loss should be assessed at
  6. What discount rate should be adopted and how should it be applied
  7. What gross profit percentage should be used
  8. How should fixed costs including rent and refurbishment costs be treated?

At [110] her Honour summarised her findings:

 (1) Mr Halligan’s “alternative C” period of assessment should be used (that is, with damages assessed until the end of the option period, being 17 July 2022).

(2) The benchmark group should comprise Hornsby, East Gardens, Macquarie and Bondi Junction stores.

(3) The discount rates applied should be 28% for losses to the date of judgment and 30% for losses thereafter.

(4) The rent increase should reflect the true position where known (that is, $138,490.56 per annum for seven months from 1 September 2007 and an annual rental of $187,000 from 1 April 2008 to the end of the current lease on 31 March 2013 with appropriate adjustments thereafter from that base).

(5) The figure of 50.3% should be used as the gross profit percentage for the 2007 financial year onwards.

(6) The refurbishment costs should be $40,000 in July 2007, $155,000 in July 2012 and $40,000 in July 2017 and subject to mid-period discounting. 

The parties were sent away to have their experts recalculate their reports on the basis of her Honour’s findings.